12.2.2.5 Establishing a causal relationship between BES loss and financial performance

Financial and economic models on the relationship between loss ofbiodiversity and the return on investment in relation to an individual company are still scarce. For mainstream asset managers i.e. managers other than those of specific ethical sustainability or ESG responsible funds proofofthe materiality of biodiversity risks would be a motivation to assess corporate behaviour towards this issue, as happened with climate change. Some interviewees ascertained that there is little proof showing that private equity funds perform better when applying ESG criteria, compared to funds with conventional investment strategies. In part, this is caused by the fact that the costs of poor ESG performance by companies are currently for a large part externalised. Negative corporate impacts on nature and ecosystem services are borne by society as a whole and not necessarily directly by the company responsible for the impact.

Presently, around the world, researchers are assessing the correlations between a good ESG performance and the financial performance of companies. In 2008, a review of 34 scientific studies showed that in 68 per cent of the studies a positive link existed between corporate social performance and corporate financial performance. Only 6 per cent of the studies showed a negative link.1 Another study illustrates that in the context of the financial crisis, companies which have sustainability considerations firmly anchored in their business model outperformed peers in 16 out of 18 sectors assessed.2More research would be needed, though, to provide a solid evidence base to correlate company BES performance with company financial performance, and ultimately with investment fund performance. A shifting focus from the impact that companies may have on biodiversity towards the dependence ofcompanies on BES could be an important step forward. This would enhance establishing tangible links between a company's core business and BES. For example, resource constraints is a recognised issue which is quantifiable. It was contended that more research is needed to provide evidence of causal relationships in specific sectors. ESG Agencies, institutional investors and scientific institutions could combine their efforts in this respect.